Advertising Agency Services - Service Tax is payable on commission received from clients but no service tax is payable on discounts received from broadcasters

The appellants render taxable service under the category of "advertising agency service". They entered into contract with their clients for providing advertisement agency service. The appellants render advertising services to various clients in the form of creative agency wherein they create advertisement by themselves or their third party media agency wherein they do media printing and /or buying for advertisement to be published in print/ electronic media. They were receiving 15% agency commission from authorized broadcasting and print media during the period April 2000 to March 2001. The appellants had passed on the above mentioned commission to their clients. The case of the department is that the appellants should have included the whole amount of commission received by them in the gross taxable value.

Findings and Discussion

In the present case, a person or an organization who want to advertise their product approaches an advertising agency. Therefore such a person /organization who wants to avail the services of advertising agency becomes the client of the advertising agency.

The advertisement can be done in various ways either through Print Media or through Radio or Television, etc. In order to fulfil the requirements of his client the advertising agency which is the service provider gets in touch with the appropriate media. In other words as far as the advertising agency is concerned, its client is not the media.

The media such as broadcasting agency charges the advertising agency for insertion of the advertisement either in Print Media or in Television. In the present case, the media gives a discount of 15% to the advertising agency. If the tariff rate is Rs. 100/-, it is sufficient the advertising agency pay the media Rs. 85/- along with service tax.

The appellants have demonstrated that they have not received any amount from the media. They got only a discount from them. Perhaps the word "commission" is misleading.

Decision

The amount received from electronic media or print media /broadcasters is not taxable in the hands of advertising agenty.